Vnre.blogspot.com - After Construction Minister Nguyen Hong Quan confirmed that there would be no national administration centre to be located in the far-lying district of Ba Vi, the real estate price storm decelerated and started to deflate. With a sharper slump in liquidity, many investors and people are in dilemma after they consentaneously react to rumour with huge investments.
Try to sell
In just the first five months in 2010, the real estate storm has driven land prices in the capital city of Hanoi up 30 percent - 60 percent from the end of 2009. Land plots facing main inter-commune streets in Thach That and Quoc Oai districts were offered at VND4-5 million per square metre before the Lunar New Year 2010, which fell in mid-February, but the rate has soared to VND8-12 million. Lands for growing perennial crops in communes near Hoa Binh province like Dong Xuan, Tien Xuan, Phu Cat and Binh Yen are being sold at VND400-800 million per sao (sao - a measure of land plot in northern Vietnam, is equivalent to 360 square metres). Land prices in western Ba Vi district are also pushed up to VND150-200 million per sao.
Before a wide change in property prices, which are reportedly out of the control of local authorities, the Government decided to take action. With the grip of the Ministry of Construction, land prices began to drop. The number of transactions has significantly declined 40 percent from the previous month.
The land plot at Geleximco project on Le Trong Tan Street was offered at VND35-36 million per square metre but has dropped to VND34-35 million at present. The price rate at Minh Giang Dam Gia in Me Linh district also slid VND1-2 million to approximately VND17 million per square metre while the price in the Bac Thang Long area also tumbled to VND12-13 million per square metre. The shock-making western area is now empty of dealers - a contrary atmosphere in a few weeks ago. Land areas offered for sale can be seen on any roadsides. Quick profit-taking investors had to accept to lose their deposits as they surely knew that it would take them more if they purchased the land. According to a survey by the Vietnam Business Forum, land prices in this area have slumped about 30 percent from the peak some weeks ago.
Shortcomings in real estate market management are attributed to growing market cornering and manipulation. Insufficient and unclear information on planning and infrastructure has misled investors to a vicious circle of seeking quick profits. The swift reversion to cooling forced many investors to dilemma as they failed to exit the market in the nick of time
Nguyen Manh Ha, Director of Housing and Real Estate Market Management Department under the Ministry of Construction, also said: The land fever in the western area of Hanoi did not cause by end-users but intermediary investors who frequently changed hands their assets for higher prices. In fact, the western area was expected to be planned but that was only the expectation, not final decision. The detailed planning was important, not general one, Ha said, warning that investors would have to pay dear for wrong decisions.
According to real estate experts, most real estate investments come from bank loans. Thus, borrowing investors are put under heavier pressures of interest repayment and loan maturity. Many will have to accept to sell at unwanted low prices to settle debts.
For secondary investors, the price reduction or increase is carried out more initiatively. For other investors, to stimulate the market demand to boost sales to take back the capital, they have to launch several promotions and lower prices. One of the most attractive promotion forms is to reduce financial burdens for customers by cooperating with banks. Developers and banks can lend up to 40-60 percent of apartment values.
One of public-interested promotion forms is the free building management in 1-2 years and discount of 5-10 percent of the apartment value for first buyers. Several investors even offer household appliances like TVs, refrigerators, gold bars, cars and even houses.
Rampant unorganised purchases or sales for years reflect lax management and regulation on the property market. Measures to deal with fevers work out in a short term. If authorities lack regimes to control the property market in the future, new gusts of hot and cold developments will continue to occur.
Reported by Luong Tuan/ VCCI News